Ripple, distributed ledger technology provider, has released a report, titled “The Cost-Cutting Case for Banks”, in which it details the ROI of using Ripple and XRP for global interbank settlements. The analysis in the paper is for a respondent bank providing its own liquidity to XRP, the native, digital asset of the Ripple consensus network.

Ripple offers cutting-edge infrastructure for cost-efficient cross-border payments, connecting parties and enabling them to pursue new revenue opportunities, while XRP is a useful trading instrument to reduce spreads and accelerate market thickness.

“While Bitcoin and other blockchain systems are a different story, Ripple can save banks up to 60 percent in costs associated with global interbank settlements”, Ripple said.

The report says that digital assets can enable real-time value exchange anywhere in the world, providing liquidity on demand and substantially reducing costs associated with treasury and payments operations, liquidity and Basel III compliance. It added that XRP offers these capabilities and can support liquidity between any two currencies.

In the present banking system, settlement delays lead to high liquidity, payment processing and operational costs. The report estimates that employing Ripple and XRP can help banks eliminate or lower these costs – the respondent bank minimizes settlement delays and can save 33% in liquidity, Basel III and operational costs.

Ripple enables the following cost efficiencies:

• Reduces liquidity costs by 65%.
• Significantly reduces staff costs for settlement-related exception processing and trade failures—eliminating 48% of payment operations costs.
• Associated Basel III costs can be reduced by as much as 99%.

It suggests that instead of holding local currency in nostro accounts around the world, trading parties (banks or third-party market makers on behalf of banks) can hold XRP on their own balance sheets. This singular XRP pool would enable respondent banks to allocate less total liquidity to service the same volume of international payments.

“Respondent banks that use Ripple with XRP as a bridge currency can save up to 42 percent on costs today and up to 60 percent as XRP gains usage and volatility decreases”, Ripple said. “To accelerate market thickness and reduce volatility for XRP, Ripple will soon introduce an XRP incentive program to algorithmically rebate market makers who provide liquidity through XRP.”